Starboard urges Yahoo to drop Alibaba spinoff plan: WSJ

(Reuters) - Yahoo Inc <YHOO.O> shareholder Starboard Value LP has urged the online media company to halt the plan to sell its stake in Alibaba Group Holdings Ltd <BABA.N> due to the risk of incurring taxes on the sale, the Wall Street journal reported.

The activist investor instead wants Yahoo to sell its struggling Internet business, the newspaper reported on Wednesday, citing a letter Starboard sent to Yahoo.

Starboard supported the sale of Yahoo's stake of more than $20 billion in Alibaba before the U.S. Internal Revenue Service (IRS) denied Yahoo's request for a private letter ruling on whether the spinoff would be considered tax free.

Yahoo said in September it would proceed with the planned spinoff of its stake in the Chinese e-commerce giant even after the IRS declined its request.

Yahoo, which has been struggling to revive its core online advertising business, expects to close the stake sale in the fourth quarter ending Dec. 31. If the IRS denies the tax-free status later, Yahoo's shareholders may have to pay about $9 billion in taxes.

Starboard and Yahoo were not available for comment outside regular U.S. business hours.